(1) See "Non-GAAP measures".(2) Excludes costs related to Ag Growth's conversion from an income trust to a corporation. See "Conversion to a Corporation" below.(3) Excludes the "gain (loss) on foreign exchange".

Overview of Results

"We are very pleased to report another record quarter" said Rob Stenson, Chief Executive Officer of Ag Growth "The significant increase in sales and EBITDA was largely due to outstanding results at the portable grain handling and aeration divisions, as strong demand, sales price increases and production efficiencies resulted in record sales and strong gross margin percentages. Commercial sales activity continues to be impacted by the availability of credit, however activity in this sector has recently shown a marked improvement and gross margins in the second quarter were consistent with the prior year."

"Our outlook for the balance of 2009 remains positive. Our primary demand drivers of grain volumes, grain storage practices and commodity prices remain supportive of continued high levels of demand. Corn acreage planted in the U.S. is expected to be the second highest on record, and according to the USDA weekly crop report the condition of the corn crop is even better than at this time in 2008, when harvested bushels per acre were the second highest ever recorded. Conditions in western Canada have also improved significantly over the last number of weeks, and although there will likely be a decrease in crop production compared to 2008, we do not expect it will have a material impact on our financial results. Overall, we remain optimistic that Ag Growth will have a strong finish to 2009."

Dividends

Ag Growth today announced cash dividends of $0.17 per common share for the months of August 2009, September 2009, and October 2009. The dividends are eligible dividends for Canadian income tax purposes. Ag Growth's current annualized cash dividend rate is $2.04 per share.

The August 2009 dividend is payable on September 30, 2009 to holders of common shares of record on August 31, 2009.

The September 2009 dividend is payable on October 30, 2009 to holders of common shares of record on September 30, 2009.

The October 2009 dividend is payable on November 30, 2009 to holders of common shares of record on October 30, 2009.

Corporate Conversion

Pursuant to a plan of arrangement under the Canada Business Corporations Act effective June 3, 2009, Ag Growth acquired all of the trust units of Ag Growth's predecessor, Ag Growth Income Fund (the "Fund"), in exchange for common shares with the effect that the Fund was "converted" from an open-ended limited purpose trust to a publicly listed corporation (the "Conversion"). The Conversion was accounted for as a continuity of interests of the Fund as there was no change of control and Ag Growth continues to operate the business of the Fund. Information in this press release reflects Ag Growth as a corporation on and subsequent to June 3, 2009 and as the Fund prior thereto, and comparative financial information is that of the Fund. For the three and six month periods ended June 30, 2009, Ag Growth incurred costs of $1.7 million related to the Conversion. Complete details of the terms of the Plan of Arrangement are set out in the arrangement agreement and the Management Information Circular that have been filed by Ag Growth on SEDAR (www.sedar.com).

Company Profile

Ag Growth is a leading manufacturer of portable and stationary grain handling, storage and conditioning equipment, including augers, belt conveyors, grain storage bins, grain handling accessories and grain aeration equipment. Ag Growth's sales, marketing, and distribution system is comprised of approximately 1,400 dealers and distributors that distribute product in 48 states, nine provinces, and overseas.

Non-GAAP measures

References to "EBITDA" are to earnings before interest, income taxes, depreciation amortization and Conversion costs. References to "Adjusted EBITDA" are to EBITDA before the gain (loss) on foreign exchange. Management believes that, in addition to net income or loss, EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the Company's performance. EBITDA and Adjusted EBITDA are not financial measures recognized by GAAP and do not have a standardized meaning prescribed by GAAP. Management cautions investors that EBITDA and Adjusted EBITDA should not replace net income or loss as indicators of performance, or cash flows from operating, investing, and financing activities as a measure of the Company's liquidity and cash flows. Ag Growth's method of calculating EBITDA and Adjusted EBITDA may differ from the methods used by other issuers.

References to "gross margin" are to sales less cost of goods sold. Management believes that, in addition to net income or loss, gross margin provides a useful supplemental measure in evaluating Ag Growth's performance. Gross margin is not a financial measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Management cautions investors that gross margin should not replace net income or loss as an indicator of performance, or cash flows from operating, investing, and financing activities as a measure of the Company's liquidity and cash flows. Ag Growth's method of calculating gross margin may differ from the methods used by other issuers.

Forward-Looking Statements

This press release contains forward-looking statements that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. Forward-looking statements may contain such words as "anticipate", "believe", "continue", "could", "expects", "intend", "plans", "will" or similar expressions suggesting future conditions or events. In particular, the forward looking statements in this press release include statements relating to the benefits of the Conversion, our business and strategy, including growth in sales to developing markets, the impact of crop conditions in our market areas, the impact of current economic conditions on the demand for our products, our working capital and capital expenditure requirements, capital resources and the payment of dividends. Such forward-looking statements reflect our current beliefs and are based on information currently available to us, including certain key expectations and assumptions concerning anticipated financial performance, business prospects, strategies, product pricing, regulatory developments, tax laws, the sufficiency of budgeted capital expenditures in carrying out planned activities and the cost of labour and services. Forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking statements, including changes in international, national and local business conditions, crop yields, crop conditions, seasonality, industry cyclicality, volatility of production costs, commodity prices, foreign exchange rates, and competition. In addition, actual results may be materially impacted by the current economic downturn, including the cost and availability of capital and the possibility of deterioration in the Company's working capital position. These risks and uncertainties are described under "Risks and Uncertainties" in our MD&A for the year ended December 31, 2008 and in our Annual Information Form. Although the forward-looking statements contained in this press release are based on what we believe to be reasonable assumptions, we cannot assure readers that actual results will be consistent with these forward-looking statements and we undertake no obligation to update such statements except as expressly required by law.

Ag Growth International Inc. ("Ag Growth" or the "Company") acquired its predecessor, Ag Growth Income Fund (the "Fund"), on June 3, 2009 pursuant to a statutory plan of arrangement under the Canada Business Corporations Act. Pursuant to the arrangement, , Ag Growth acquired all of the trust units of the Fund in exchange for common shares of Ag Growth, and the Fund was "converted" from an open-ended limited purpose trust to a publicly listed corporation (the "Conversion"). Ag Growth continues to conduct business in the grain handling, storage and conditioning market.

This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the audited consolidated financial statements and accompanying notes of the Fund for the year ended December 31, 2008, and the unaudited interim consolidated financial statements of the Company for the three and six month periods ended June 30, 2009. Results are reported in Canadian dollars unless otherwise stated and have been prepared in accordance with Canadian generally accepted accounting principles. Throughout this MD&A references are made to "EBITDA", "adjusted EBITDA", "gross margin", "funds from operations" and "payout ratio". A description of these measures and their limitations are discussed below under "Non-GAAP Measures". See also "Risks and Uncertainties" in our MD&A for the year ended December 31, 2008 and in our Annual Information Form, and "Forward-Looking Statements" below.

Information in this MD&A reflects Ag Growth as a corporation on and subsequent to June 3, 2009 and as the Fund prior thereto. All references to "common shares" refer collectively to Ag Growth's common shares on and subsequent to June 3, 2009 and to the Fund's trust units prior to the Conversion. All references to "dividends" refer to dividends paid or payable to holders of Ag Growth common shares on and subsequent to June 3, 2009 and to distributions paid or payable to Fund unitholders prior to Conversion. All references to "shareholders" or "security holders" refer collectively to holders of Ag Growth's common shares on and subsequent to June 3, 2009 and to Fund unitholders prior to the Conversion. References to the "Share Award Incentive Plan" should be read as references to the "Unit Award Incentive Plan" for all periods prior to the Conversion.

CONVERSION TO A CORPORATION

The Fund's decision to convert to a corporation arose from the federal government's October 31, 2006 announcement and subsequent legislation (the "SIFT legislation") to impose additional income taxes on publicly traded income trusts, including the Fund, effective January 1, 2011. In addition, in order to qualify under new legislation for a tax-free conversion, it was necessary to convert to a corporation before the end of 2013. Management and the Fund's Board of Trustees had been proactively assessing several options available to provide long-term stability of distributions for unitholders while mitigating the impact of the trust taxation legislated by the Federal Government in June 2007. As the tax enhancement value related to the income trust structure diminished, it was determined that the benefits of an early conversion to a corporation outweighed the value of remaining under the trust structure.

The Conversion was completed pursuant to a Plan of Arrangement that was approved at a special meeting (the "Special Meeting") of the Fund's unitholders and holders of exchangeable limited partnership units of AGX Holdings Limited Partnership held on June 3, 2009. Under the Plan of Arrangement, the Fund's unitholders received one common share of Benachee Resources Inc. ("Benachee") in exchange for each Fund unit and/or exchangeable unit held, resulting in the Fund unitholders becoming shareholders of Benachee. Benachee then changed its name to "Ag Growth International Inc." and the existing trustees and management of the Fund became the board and management of Ag Growth. The Conversion was accounted for as a continuity of interests of the Fund since there was no change of control and since Ag Growth continues to operate the business of the Fund.

Pursuant to the Plan of Arrangement, Ag Growth also issued consideration in the form of $5.0 million cash, an additional 182,588 common shares, and stated value $4.0 million redeemable preferred shares which are convertible into 140,452 common shares. Ag Growth did not retain the business previously carried on by Benachee. Costs incurred with respect to the Conversion are $1.7 million for the period ended June 30, 2009.

The key benefits of the Conversion include the following:

- Canadian taxable unitholders may benefit from lower income taxes paid on corporate dividends compared to taxes paid on distributions of the Fund;

- The Conversion will enable Ag Growth to reinvest a significant portion of its free cash flow into the business in order to capitalize on future growth opportunities;

- The Conversion may result in greater access to capital in Canada, the United States and other international markets.

- The Conversion removed the "normal growth" and "undue expansion restrictions" in the SIFT legislation which limited the Fund's ability to consider strategic acquisitions;

Complete details of the terms of the Plan of Arrangement are set out in the Arrangement Agreement and the Management Information Circular for the Special Meeting that have been filed by Ag Growth on SEDAR (www.sedar.com).

FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. Forward-looking statements may contain such words as "anticipate", "believe", "continue", "could", "expects", "intend", "plans", "will" or similar expressions suggesting future conditions or events. In particular, the forward looking statements in this MD&A include statements relating to the benefits of the Conversion, our business and strategy, including growth in sales to developing markets, the impact of crop conditions in our market areas, the impact of current economic conditions on the demand for our products, our working capital and capital expenditure requirements, capital resources and the payment of dividends. Such forward-looking statements reflect our current beliefs and are based on information currently available to us, including certain key expectations and assumptions concerning anticipated financial performance, business prospects, strategies, product pricing, regulatory developments, tax laws, the sufficiency of budgeted capital expenditures in carrying out planned activities and the cost of labour and services. Forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking statements, including changes in international, national and local business conditions, crop yields, crop conditions, seasonality, industry cyclicality, volatility of production costs, commodity prices, foreign exchange rates, and competition. In addition, actual results may be materially impacted by the current economic downturn, including the cost and availability of capital and the possibility of deterioration in the Company's working capital position. These risks and uncertainties are described under "Risks and Uncertainties" in our MD&A for the year ended December 31, 2008, in our Annual Information Form and in the Management Information Circular for the Special Meeting. Although the forward-looking statements contained in this MD&A are based on what we believe to be reasonable assumptions, we cannot assure readers that actual results will be consistent with these forward-looking statements and we undertake no obligation to update such statements except as expressly required by law.

CURRENT ECONOMIC CONDITIONS

The current economic downturn and related economic uncertainty has impacted nearly every industry, including certain segments of the agricultural industry. General economic developments are not expected to significantly impact Ag Growth's results in 2009.

Sales of portable grain handling and aeration equipment historically represent 65% to 75% of Ag Growth's total sales. The primary demand drivers for portable grain handling and aeration equipment are volume of grains grown, storage practices, and commodity prices. These factors are expected to continue to support robust demand:

- The United States Department of Agriculture ("USDA") released its Acreage Report on June 30, 2009. The report estimated corn planting for 2009 at 87.0 million acres (2008 - 86.0 million acres) and soybean plantings of 77.5 million acres (2008 - 75.7 million acres). This represents the second largest U.S. corn acreage in history and a record high for soybean acreage. Plantings at these levels are expected to support strong demand for Ag Growth's portable grain handling and aeration equipment.

- The long-term trend towards increased on-farm storage stimulates the sale of bin aeration and grain handling equipment as farmers are required to handle increased quantities of grains at the farm level. Management expects this long-term trend to continue due to the increasing prevalence of larger and more sophisticated farming operations and a trend towards increased acreage and crop yields which has resulted from improved land management and enhanced seed technology.

- Agricultural commodity prices have retracted from record highs however they remain well above historical averages. Management believes that higher commodity prices should remain supported by global agricultural fundamentals and continued low stock-to-use ratios. In addition, legislation mandating corn-based ethanol production is expected to continue to support corn acreage and commodity prices. The long-term projections released by the USDA in February 2009 support the view that corn prices should remain above their pre-2006 levels. Although the cost of farm inputs including fuel and fertilizer have increased significantly in recent years, management believes that current commodity prices are sufficient to support healthy farm net incomes and the decision of U.S. farmers to plant the second largest crop of input-intensive corn appears to support this view.

Ag Growth's remaining sales relate primarily to storage bins and stationary grain handling equipment, with a small component related to livestock equipment. Sales of Ag Growth's storage equipment is currently concentrated in western Canada, however, Ag Growth is continuing to pursue overseas opportunities to grow its storage business. Availability of credit in certain developing markets is currently tempering international sales growth. Stationary grain handling equipment is geared towards new construction and facility upgrades in the commercial grain handling and value-added food processing space. Macro-economic factors and the availability of credit are having a limited negative impact on these product lines. Management believes sales of stationary grain handling equipment may decrease in 2009, however not to the extent to offset anticipated gains in portable grain handling and aeration equipment. Sales of livestock equipment were depressed prior to the economic downturn due to a weak livestock sector.

Ag Growth does not believe the availability of credit will have a significant impact on demand for its products. The Company's portable equipment is relatively low priced and does not represent a significant investment for a farmer. In addition, the equipment is essential to continuing farming operations and must be replaced on a regular basis. Access to credit is having a limited negative impact on the domestic commercial sector, as discussed above, and is tempering overseas growth in developing markets. Ag Growth's sales to developing markets in 2008 were $6.5 million and it is not expected that sales to these markets will decrease significantly in 2009.

NORTH AMERICAN CROP CONDITIONS

United States

The following table summarizes the plantings estimated in the USDA's Acreage Report. The volume of grains grown is a primary demand driver for Ag Growth and accordingly management believes that the estimates indicate potential strong demand for portable grain handling and aeration equipment.

Growing conditions have improved significantly after cold and wet conditions in the spring of 2009 delayed planting in many key states. It should be noted that corn yields per acre in 2008 were the second highest on record. The following table summarizes the percentage of crop classified as "Good" or "Excellent" per the USDA August 3, 2009 Weekly Weather and Crop Bulletin.

Growing conditions in western Canada are mixed. Timely rains have eased drought conditions in most areas of Saskatchewan and large portions of Alberta. Moisture conditions in Manitoba are at or above normal. Plantings in most areas were later than usual and stressful growing conditions in Alberta and Saskatchewan will likely reduce yields in some areas. Overall, crop production in western Canada is expected to decrease somewhat from 2008 and more closely approximate historical averages. Ag Growth's sales to Canada in the six months ended June 30, 2009 were $38.7 million (2008 - $22.1 million) and management does not expect a decrease in crop production will materially impact its financial results. Lower yields may negatively impact the sales of portable grain handling equipment, however, the potential of a late harvest, the result of a late planting season and cool weather, is supportive of both portable grain handling and aeration sales.

RATE OF FOREIGN EXCHANGE

The rate of exchange between the Canadian and U.S. dollars may be a significant factor when comparing financial results to prior periods. A weaker Canadian dollar will result in higher sales and higher expenses as transactions denominated in U.S. dollars are translated to Canadian dollars at a higher rate. For the three and six months ended June 30, 2009, sales denominated in U.S. dollars accounted for 68% and 67% of total sales, respectively (2008 - 73% and 75%) and U.S. dollar denominated expenses for the periods then ended equated to 33% and 31% of sales, respectively (2008 - 35% and 37%).

Ag Growth's sales denominated in U.S. dollars significantly exceed its purchases denominated in U.S. dollars and as a result a weaker Canadian dollar benefits the Company's financial results. Ag Growth's average rates of exchange per U.S. dollar for the three and six months ended June 30, 2009 were $1.18 and $1.21, respectively, compared to $1.01 and $1.00 for the same periods in 2008. Accordingly, the weaker Canadian dollar in the first six months of 2009 positively impacted Ag Growth's financial results compared to the same periods in 2008. The Canadian dollar has strengthened recently, and accordingly the favourable impact of foreign exchange realized in the first half of 2009 may not be realized in the second half of the fiscal year.

Ag Growth translates its U.S. dollar denominated debt into Canadian dollars at each balance sheet date, and the non-cash, unrealized gain or loss that results from this quarterly measurement is included in "gain (loss) on foreign exchange" on the statement of earnings. For the three and six months ended June 30, 2009, Ag Growth recorded a gain on the measurement of its U.S. dollar denominated debt of $3.7 million and $2.3 million, respectively (2008 - gain of $0.1 million and loss of $0.9 million).

(1) Research and development, capital taxes and other expense (income).(2) See "Conversion to a Corporation".(3) See "non-GAAP Measures".(4) Excludes Conversion costs.(5) Excludes the gain (loss) on foreign exchange.

----------------------------------------------------------------------------ASSETS AND LIABILITIES June 30 June 30(thousands of dollars) 2009 2008----------------------------------------------------------------------------

The table below summarizes dividends and distributions declared to security holders of Ag Growth and the Fund for the three and six month periods ended June 30, 2009 and 2008. The Company's dividend policy is described in the "Dividends" section of this MD&A.

Ag Growth reported record sales and EBITDA for the three and six month periods ended June 30, 2009. Demand for portable grain handling and aeration equipment remained strong due to positive agricultural fundamentals, successive large harvests and continued high levels of on-farm storage. Sustained capacity gains at the Westfield division played a major role in allowing Ag Growth to capitalize on these positive market drivers.

Sales for the three and six month periods ended June 30, 2009 were $66.8 million and $122.1 million, respectively, representing increases of 19% and 34% over the same periods in 2008. In addition to positive demand drivers and an increase in capacity at Westfield, sales benefited from the sales price increases announced in 2008 and a weaker Canadian dollar. As expected, sales of commercial equipment decreased, largely due to macro-economic factors.

Gross margin (see "non-GAAP measures") as a percentage of sales for the three and six months ended June 30, 2009 were 42.5% (2008 - 34.3%) and 41.9% (2008 - 35.0%), respectively. The significant increase in gross margin percentages was largely the result of sales price increases, the impact of foreign exchange, an increase in capacity and efficiency at Westfield (the Westfield capacity improvement initiative was completed in March 2008) and improved results at the Edwards/Twister division.

Adjusted EBITDA for the three and six months periods ended June 30, 2009 was $18.2 million and $31.3 million (2008 - $11.3 million and $17.0 million). The increases of 61% and 84% over 2008 were due primarily to significant increases in sales and gross margin of portable grain handling and aeration equipment, improved results at Edwards/Twister, and the impact of foreign exchange, offset by a decrease in commercial sales activity.

For financial statement reporting purposes, Ag Growth translated its U.S. dollar denominated debt to Canadian dollars at the rate of exchange in effect on the balance sheet date of June 30, 2009. The unrealized gain on translating U.S. dollar debt into Canadian dollars was $3.7 million and $2.3 million for the three and six month periods ended June 30, 2009, compared to a gain of $0.1 million and a loss of $0.9 million for the same periods in 2008. For the three and six month periods ended June 30, 2009, EBITDA was $20.0 million and $31.0 million (2008 - $11.6 million and $16.7 million), respectively. The increase in EBITDA in 2009 is due to a significant increase in operating income and foreign exchange gains.

Sales

Sales for the three and six months ended June 30, 2009 were $66.8 million (2008 - $56.0 million) and $122.1 million (2008 - $91.1 million), respectively. The increase in sales over 2008 is largely due to the following:

- Strong demand for portable grain handling and aeration equipment in the North American market that resulted from positive agricultural fundamentals, successive large harvests and continued high levels of on-farm storage.

- Sales levels benefited from sales price increases, a more favourable rate of foreign exchange, an increase in Twister capacity and higher capacity at Westfield (the Westfield capacity improvement initiative was completed in March 2008).

- Total international sales for the three and six months ended June 30, 2009 were $4.4 million and $6.6 million, respectively (2008 - $6.8 million and $8.0 million). Sales to developing markets in Russia and Kazakhstan were $2.4 million in the six months ended June 30, 2009, compared to $3.5 million in the prior year.

- Sales of commercial equipment for the three and six months ended June 30, 2009 decreased compared to the same periods in 2008. The decrease was in line with management expectations as macro-economic factors including the availability of credit impacted commercial sales.

- The Company's financial statements translate U.S. dollar denominated sales into Canadian dollars based on the actual foreign exchange rate in the month of the sale. For the three and six month periods ended June 30, 2009, the more favourable exchange rates experienced in 2009 resulted in an increase in reported sales of $7.2 million and $14.4 million, respectively, compared to the sales that would have been reported using the exchange rates in effect in the first quarter of 2008.

Gross Margin

Gross margin as a percentage of sales for the three and six months ended June 30, 2009 was 42.5% and 41.9%, respectively, compared to 34.3% and 35.0% for the same periods in 2008. The increase in gross margin percentages compared to 2008 was largely due to the following:

- Gross margin percentages on portable grain handling, storage and aeration equipment benefited from the realization of price increases announced in 2008.

- For the three and six month periods ended June 30, 2009, the positive impact of foreign exchange accounted for approximately 2% of the increases of 8.2% and 6.9% over the same periods in 2008.

- Gross margin at most divisions in 2009 has benefited from lower input costs compared to 2008, particularly lower steel costs. Due to the length of its supply chain, input costs of Twister product have not benefited from the decrease in the spot price of steel.

- Gross margin at Twister has improved significantly in 2009 due to production improvements that resulted largely from the implementation of lean manufacturing practices.

- Completion of the capacity improvement initiative at Westfield increased throughput and efficiency, however gross margin was negatively impacted while the project was implemented in the first quarter of 2008.

Expenses

Selling, general and administrative expenses for the three months ended June 30, 2009 were $8.4 million or 12.6% of sales (2008 - $6.8 million and 12.1%). The increase of $1.6 million over 2008 is primarily due to the following:

- A number of Ag Growth's selling, general and administrative expenses are denominated in U.S. dollars. Due to a weaker Canadian dollar these expenses were translated to Canadian dollars at a higher rate. The impact of the weaker Canadian dollar for the three month period was to increase expenses by $0.5 million compared to 2008.

- Sales and marketing expense increased $0.5 million due largely to the development of an international sales group and wage adjustments.

- Salary expense increased $0.5 million due to personnel additions to facilitate growth and acquisition integration, wage adjustments, and a number of smaller items.

- A number of miscellaneous items with variances of $0.2 million or less accounted for the remaining change.

Selling, general and administrative expenses for the six months ended June 30, 2009 were $16.7 million or 13.7% of sales (2008 - $13.1 million or 14.4%). The increase of $3.7 million over 2008 is primarily due to the following:

- A number of Ag Growth's selling, general and administrative expenses are denominated in U.S. dollars. Due to a weaker Canadian dollar these expenses were translated to Canadian dollars at a higher rate. The impact of the weaker Canadian dollar for the six month period was to increase expenses by $1.0 million compared to 2008.

- Sales and marketing expense increased $1.2 million due largely to the development of an international sales group and wage adjustments.

- Salary expense increased $0.9 million due to personnel additions to facilitate growth and acquisition integration, wage adjustments, and a number of smaller items.

- Commission expense payable to third parties increased $0.4 million largely due to increased sales at Westfield.

- Costs of $0.4 million were incurred with respect to the implementation of lean manufacturing at Twister.

- A number of miscellaneous items with variances of $0.3 million or less accounted for the remaining change.

Other significant items include the following:

- Calculation of the share award incentive plan ("SAIP") expense is based on the trading price of the Company's common shares at the balance sheet date and the vesting provisions of the SAIP. For the three and six months ended June 30, 2009, Ag Growth recorded an expense related to the SAIP of $0.8 million and $1.7 million, respectively (2008 - $0.7 million and $0.9 million).

- Ag Growth's LTIP provides for annual awards based on distributable cash generated. The awards are expensed over the term of the participant's vesting period and as a result the expense in 2009 also includes a component related to fiscal 2007 and 2008. For the three and six months ended June 30, 2009, Ag Growth recorded an expense related to the LTIP of $0.7 million and $1.2 million, respectively (2008 - $0.2 million and $0.6 million).

- For financial statement reporting purposes, Ag Growth translated its U.S. dollar denominated debt to Canadian dollars at the rate of exchange in effect on the balance sheet date of June 30, 2009. For the three and six month periods ended June 30, 2009, the Company recorded gains on the translation of its U.S. dollar debt of $3.7 million and $2.3 million, respectively (2008 - gain of $0.1 million and loss of $0.9 million). Also included in "gain (loss) on foreign exchange" are gains or losses on foreign exchange derivative contracts and the gains or losses on the translation of U.S. dollar denominated working capital.

EBITDA and Net Earnings (see discussion of non-GAAP measures)

Adjusted EBITDA for the three and six months ended June 30, 2009 was $18.2 million and $31.3 million, respectively (2008 - $11.3 million and $17.0 million). The increases over 2008 are due primarily to significant increases in sales and gross margin at Westfield and at Edwards/Twister and the impact of foreign exchange, offset by a decrease in commercial sales activity.

EBITDA for the three and six months ended was $20.0 million and $31.0 million, respectively, compared to $11.6 million and $16.7 million in 2008. The increase in EBITDA is the result of a significant increase in operating income and the impact of foreign exchange.

Ag Growth's credit facility includes CAD $25.0 million and USD $2.0 million available for working capital purposes, and provides for long-term debt of up to USD $54.5 million. As at June 30, 2009, a total of $7.3 million was outstanding under the operating lines. Outstanding long-term debt is CAD $55.6 million at June 30, 2009 (December 31, 2008- $52.8 million), comprised of term loans of USD $37.6 million and CAD $11.9 million. Interest rates on both facilities are based on performance calculations. For the three and six months ended June 30, 2009, the Company's effective interest rate on its U.S dollar term debt was 4.3% and 3.8%, respectively (2008 - 6.6% and 7.1%), and after consideration of the effect of its interest rate swaps was 4.3% and 4.1% (2008 - 6.1% and 6.0%). For the three and six month periods ended June 30, 2009, Ag Growth's effective interest rate on its Canadian dollar term debt was 3.3% and 3.2% (2008 - N/A as no CAD denominated debt outstanding in periods). See "Financial Instruments".

Amortization of capital assets for the three and six months ended June 30, 2009 was $1.3 million and $2.6 million, respectively (2008 - $1.4 million and $2.5 million). Amortization of intangibles for the same periods was $0.7 million and $1.5 million (2008- $0.7 million and $1.5 million).

For the three and six months ended June 30, 2009, the Company recorded a current tax expense of $0.9 million and $0.2 million, respectively (2008 - $1.3 million and $1.8 million). The current tax expense relates to certain subsidiary corporations of Ag Growth, including its U.S. based divisions. Ag Growth converted from an income trust to a taxable corporation on June 3, 2009 (see "Conversion to a Corporation"). As at June 3, 2009, Ag Growth had Canadian future tax assets of approximately $69.8 million available to offset Canadian taxable income. For the periods ended June 30, 2009, the Company reduced its Canadian tax liability to zero through the utilization of $3.7 million of its future tax assets.

For the three and six months ended June 30, 2009, the Company recorded future tax recoveries of $1.8 million and $2.9 million, respectively (2008 - expense of $0.2 million and $0.3 million). The future tax recovery in the second quarter of 2009 was largely related to the Conversion. The Company recorded a future tax asset and a related future tax recovery of $2.1 million due to application of corporate tax rates to reversals of temporary differences expected to occur between June 30, 2009 and December 31, 2010. Prior to Conversion, the Fund's effective income tax rate for this period was nil and accordingly a future tax asset was not recorded. This recovery of $2.1 million in the three months ended June 30, 2009 was partially offset by a $0.4 million expense related to the utilization of future tax assets to offset taxable income. A number of miscellaneous items accounted for the remaining change.

For the three and six months ended June 30, 2009, the Company reported net earnings of $16.4 million and $26.6 million, respectively (2008 - $7.5 million and $9.3 million), basic net earnings per unit of $1.29 and $2.09 (2008 - $0.58 and $0.72), and fully diluted net earnings per unit of $1.28 and $2.07 (2008 - $0.58 and $0.72).

Interim period revenues and earnings historically reflect some seasonality. The third quarter is typically the strongest primarily due to high in-season demand at the farm level. Due to the seasonality of Ag Growth's working capital movements, cash provided by operations will typically be highest in the fourth quarter. The following factors impact comparability between quarters in the table above:

- Sales, gain (loss) on foreign exchange, net earnings, and net earnings per share are significantly impacted by the rate of exchange between the Canadian and U.S. dollars.

- The second quarter of 2009 includes costs related to the Conversion.

- Ag Growth records a foreign exchange gain or loss when translating U.S. dollar denominated debt into Canadian dollars for reporting purposes. A significant loss was recorded in the fourth quarter of 2008 and the first quarter of 2009, and a significant gain was recorded in the second quarter of 2009.

- The second quarter of 2007 includes a non-cash future tax accrual of $11.1 million related to the enactment of taxation laws related to income trusts for taxation years commencing January 1, 2011. The fourth quarter of 2007 includes a $1.6 million credit to future taxes to reflect a lower expected effective tax rate.

- Subsequent to January 15, 2008, results reflect the acquisition of Applegate.

- Subsequent to November 19, 2007, results reflect the acquisition of Union Iron.

- Subsequent to May 31, 2007, results reflect the acquisition of Twister.

CASH FLOW AND LIQUIDITY

The table below reconciles net earnings to cash provided by operations for the three and six month periods ended June 30, 2009 and 2008:

For the three and six months ended June 30, 2009, cash provided by operations was $10.2 million and $6.5 million, respectively (2008 - cash used of $4.1 million and $15.5 million). The significant improvement in cash flow from operations was achieved largely because sales and net earnings increased without a proportionate investment in working capital.

In fiscal 2009 we expect that non-cash working capital requirements will more closely approximate historical patterns and will not impact cash flows to the same extent as 2008. Accounts receivable and inventory balances are expected to remain high compared to prior years to support higher levels of sales activity, however we do not expect that Ag Growth will be required to invest significant resources to support further working capital increases as was the case in 2008. Ag Growth's working capital requirements in 2009 will be impacted by sales demand as well as certain risk factors including customer access to credit and fluctuations in input costs. Results to date in 2009 have generally reflected these expectations.

Working Capital Requirements

Interim period working capital requirements typically reflect the seasonality of the business. Ag Growth's collections of accounts receivable are weighted towards the third and fourth quarters. This collection pattern, combined with historically high sales in the third quarter that result from seasonality, typically lead to accounts receivable levels increasing throughout the year and peaking in the third quarter. Inventory levels typically increase in the first and second quarters and then begin to decline in the third or fourth quarter as sales levels exceed production. As a result of these working capital movements, historically, Ag Growth begins to draw on its operating lines in the first or second quarter. The operating line balance typically peaks in the second or third quarter and normally begins to decline later in the third quarter as collections of accounts receivable increase. Ag Growth has typically fully repaid its operating line balance by early in the fourth quarter. Results to date in 2009 have generally reflected these expectations, however due to the significant increase in cash provided by operations in 2009, the Company has not drawn on its operating lines to the same extent as in prior years.

Results in 2008 differed somewhat from historical patterns as additional cash resources were required to support inventory levels as an increase in purchasing resulted from increased production, higher input prices, and an increased investment in raw material to protect against rising input prices. Accordingly, the consolidated inventory balance did not decrease in the second half as it had done historically. In addition, the accounts receivable balance did not decrease in the fourth quarter to the same extent as prior years due to increased sales activity in the fourth quarter.

Capital Expenditures

Ag Growth had maintenance capital expenditures of $0.8 million and $1.3 million for the three and six months ended June 30, 2009 (2008 - $0.6 million and $1.5 million). Maintenance capital expenditures in 2009 relate primarily to purchases of manufacturing equipment. Maintenance capital expenditures in a fiscal year are generally funded through cash from operations. Due to seasonality of the Company's cash flows, capital expenditures may be funded on a short-term basis through Ag Growth's credit facilities (see "Capital Resources").

Ag Growth defines maintenance capital expenditures as cash outlays required to maintain plant and equipment at current operating capacity and efficiency levels. Non-maintenance capital expenditures encompass other investments, including cash outlays required to increase operating capacity or improve operating efficiency, and may be financed with long-term debt. Ag Growth had non-maintenance capital expenditures of $0.9 million and $1.4 million for the three and six months ended June 30, 2009 (2008 - $2.0 million and $6.4 million). The following capital expenditures were classified as non-maintenance in 2009:

i. Union City, Indiana - a manufacturing facility was acquired to allow for the transfer of certain production from western Canada as well as to provide a more efficient facility for Applegate. Ag Growth has expended $0.6 million on this project in 2009 and additional expenditures are not expected to be significant.

ii. Westfield warehousing facility -Westfield invested $0.4 million towards constructing a warehousing facility in Fargo, ND. Additional expenditures in 2009, net of expected proceeds from the sale of its existing facility, are expected to be $0.2 million.

iii. Westfield robotics - Westfield invested $0.2 million in additional robotic manufacturing to increase capacity. Additional expenditures in 2009 are not expected to be significant.

iv. Completion of projects from 2008 - an additional $0.2 million was expended with respect to capacity initiatives at Batco and Westfield. Additional expenditures in 2009 are not expected to be significant.

Maintenance capital expenditures in 2009 are expected to approximate 2008 levels and it is anticipated that these expenditures will be financed from operations. Non-maintenance capital expenditures in 2009 are expected to decrease significantly compared to 2008 and these expenditures may be financed with long term debt or through funds generated from operations.

Cash Balance

For the six months ended June 30, 2009, the Company's cash balance decreased $4.4 million (2008 - $20.4 million), and as at June 30, 2009 the Company had drawn $7.3 million on its operating lines (2008 - $12.3 million). Accordingly, the total movement in cash and bank indebtedness for the six month period ended June 30, 2009 was a decrease of $11.7 million (2008 - $32.7 million). A decrease in cash and an increase in bank indebtedness is expected in the first six months of a fiscal year due to the seasonality of the Company's cash flows. The significant improvement in cash flow compared to 2008 was achieved largely because sales and net earnings increased without a proportionate investment in working capital.

Long-term debt at June 30, 2009 includes non-amortizing term loans of $55.7 million (comprised of U.S. dollar debt of $37.6 million and CAD $11.9 million), which for financial reporting purposes are shown net of the related deferred financing costs of $0.1 million. The remaining long-term debt relates to GMAC financed vehicle loans. The operating leases relate primarily to vehicle, equipment, warehousing, and facility leases and were entered into in the normal course of business.

Fargo warehouse

The Company's Westfield division has outstanding commitments totalling U.S. $1.0 million in relation to a new warehousing facility under construction in Fargo, ND. The total investment, net of expected proceeds from the sale of Westfield's existing warehouse in Fargo, is expected to approximate U.S. $0.6 million.

CAPITAL RESOURCES

The Company's bank indebtedness as at June 30, 2009 was $7.3 million (2008 - $12.3 million) and its outstanding long-term debt was CAD $55.7 million (2008 - $34.9 million), comprised of term loans of USD $37.6 million and CAD $11.9 million. Under the existing credit facility, the operating and term loans will bear interest at prime plus 1.75% to 2.00% per annum based on performance calculations. For the three and six months ended June 30, 2009, the Company's effective interest rate on its U.S dollar term debt was 4.3% and 3.8%, respectively (2008 - 6.6% and 7.1%), and after consideration of the effect of its interest rate swaps was 4.3% and 4.1% (2008 - 6.1% and 6.0%). For the three and six month periods ended June 30, 2009, Ag Growth's effective interest rate on its Canadian dollar term debt was 3.3% and 3.2% (2008 - N/A as no CAD denominated debt outstanding in periods). See "Financial Instruments".

Under the terms of the existing credit facility agreement, if the operating and term loan facilities are not extended beyond the current August 31, 2009 maturity date, all amounts outstanding under the facilities become repayable in four equal quarterly instalments of principal, commencing November 30, 2010.

The Company has elected not to request a renewal of its existing credit facility but rather has negotiated a new credit facility with a group of financial institutions that includes its incumbent lenders. Terms and conditions of the new facility have been agreed upon in principle and Ag Growth has requested that its incumbent lenders extend the existing credit facility to October 31, 2009 to allow time to document and close the new arrangement. The new facility will provide Ag Growth with increased access to debt financing and increased flexibility with respect to its capital structure.

COMMON SHARES

The following common shares were issued and outstanding and participated pro rata in dividends during the periods indicated:

December 31, 2007 12,818,915 136,085 0----------------------------------------------------------------------------Purchased under normal course issuer bid (200,000) 0 0----------------------------------------------------------------------------Outstanding at December 31, 2008 12,618,915 136,085 0----------------------------------------------------------------------------Conversion (2) (12,618,915) (136,085) 12,755,000----------------------------------------------------------------------------Additional common shares issued upon Conversion (2) 0 0 182,588----------------------------------------------------------------------------Outstanding at June 30 and August 11, 2009 0 0 12,937,588----------------------------------------------------------------------------(1) Prior to Conversion, there were 136,085 Class B Exchangeable units outstanding in a subsidiary of the Fund that were exchangeable for Fund Trust units at the option of the holder on a one-for-one basis at any time.(2) See "Conversion to a Corporation".

On October 22, 2008, Ag Growth commenced a normal course issuer bid for up to 1,262,090 common shares, representing 10% of the Fund's public float at that time. The normal course issuer bid will terminate on October 21, 2009 unless terminated earlier by Ag Growth. Common shares purchased under the normal course issuer bid will be cancelled. Common shares are purchased at market price and in accordance with Toronto Stock Exchange ("TSX") requirements. For the period ending December 31, 2008, Ag Growth purchased and cancelled 200,000 common shares at an average share price of $19.47 for total cash consideration of $3.9 million. No common shares were purchased under the normal course issuer bid in the six months ended June 30, 2009.

Ag Growth has granted 220,000 share awards under its share award incentive plan. The share awards remain outstanding at August 11, 2009 and, subject to vesting and payment of the exercise price, are each exercisable for one common share.

In April 2009, the administrator of Ag Growth's long-term incentive plan (the "LTIP") acquired 11,008 common shares to satisfy its obligations with respect to awards under the LTIP for fiscal 2008. In April 2008, the administrator of the Company's LTIP acquired 70,400 common shares to satisfy its obligations with respect to fiscal 2007. These common shares are not cancelled but rather are held by the administrator until such time as they vest to the LTIP participants. As at June 30, 2009, a total of 23,467 common shares related to the LTIP had vested to the participants.

Ag Growth's common shares trade on the Toronto Stock Exchange under the symbol AFN.

REDEEMABLE PREFERRED SHARES

Pursuant to the Plan of Arrangement, Ag Growth issued 4,000,000 redeemable preferred shares with a stated value of $1.00 per share. The preferred shares are entitled to receive fixed cumulative preferential cash dividends, as and when declared by the Board, out of monies properly applicable to the payment of dividends at a rate $0.05 per share per annum. Each preferred share is also convertible at the holder's option into 0.035113 of a common share, for a total of 140,452 common shares, at any time up to three years from the date of issuance. Each preferred share is redeemable at any time from the date of issuance until June 30, 2010 at the option of Ag Growth, and retractable at the holder's option at any time on or after June 30, 2010, in each case for $1.00 cash per preferred share plus accrued and unpaid cumulative dividends thereon. The redeemable preferred shares are not publicly traded.

DIVIDENDS

Ag Growth declared dividends to security holders of $6.5 million and $13.0 million for the three and six month periods ended June 30, 2009, respectively (2008 - $5.4 million and $10.9 million). Total distributions declared to security holders are higher due primarily to an increase in the dividend rate, as Ag Growth increased its monthly dividend level by $0.03 per share to $0.17 per share effective August 2008.

Ag Growth's policy is to pay monthly dividends. The Company's Board of Directors reviews financial performance and other factors when assessing dividend levels. An adjustment to dividend levels may be made at such time as the Board determines an adjustment to be in the best interest of the Company and its shareholders.

FUNDS FROM OPERATIONS

Funds from operations, defined under "non-GAAP measures", is the equivalent of Adjusted EBITDA, less interest expense, current cash taxes and maintenance capital expenditures, plus the non-cash component of interest expense and stock based compensation. The objective of presenting this measure is to provide a measure of free cash flow. The definition excludes changes in working capital as they are necessary to drive organic growth and are expected to be financed by the Company's operating facility (See "Capital Resources"). Funds from operations should not be construed as an alternative to cash flows from operating, investing, and financing activities as a measure of the Company's liquidity and cash flows.

(1) Includes special distributions of the Fund of $1,329 in 2004, $3,368 in 2005, and $3,061 in 2008.

Dividends in a fiscal year are typically funded entirely through cash from operations, although due to seasonality dividends may be funded on a short-term basis by the Company's operating lines. In 2008, due to increased working capital investments required to maintain growth, total dividends exceeded cash provided by operations. As a result, a portion of 2008 dividends were financed from the Company's opening cash balance. In fiscal 2009 it is expected that dividends will be funded entirely through cash from operations.

Ag Growth's Board of Directors reviews financial performance and other factors when assessing dividend levels. An adjustment to dividend levels may be made at such time as the Board determines an adjustment to be in the long-term best interest of the Company and its shareholders. Ag Growth believes its current dividend levels are sustainable.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. By their nature, these estimates are subject to a degree of uncertainty and are based on historical experience and trends in the industry. Management reviews these estimates on an ongoing basis. While management has applied judgment based on assumptions believed to be reasonable in the circumstances, actual results can vary from these assumptions. It is possible that materially different results would be reported using different assumptions.

Ag Growth believes the accounting policies that are critical to its business relate to the use of estimates regarding the recoverability of accounts receivable and the valuation of inventory, intangibles, goodwill, and future income taxes. Ag Growth's accounting policies are described in Note 2 to the audited financial statements for the year ended December 31, 2008.

Allowance for Doubtful Accounts

Due to the nature of Ag Growth's business and the credit terms it provides to its customers, estimates and judgments are inherent in the on-going assessment of the recoverability of accounts receivable. Ag Growth maintains an allowance for doubtful accounts to reflect expected credit losses. A considerable amount of judgment is required to assess the ultimate realization of accounts receivable and these judgments must be continuously evaluated and updated. Ag Growth is not able to predict changes in the financial conditions of its customers, and the Company's judgment related to the recoverability of accounts receivable may be materially impacted if the financial condition of the Company's customers deteriorates.

Valuation of Inventory

Assessments and judgments are inherent in the determination of the net realizable value of inventories. The cost of inventories may not be fully recoverable if they are slow moving, damaged, obsolete, or if the selling price of the inventory is less than its cost. Ag Growth regularly reviews its inventory quantities and reduces the cost attributed to inventory no longer deemed to be fully recoverable. Judgment related to the determination of net realizable value may be impacted by a number of factors including market conditions.

Goodwill and Intangible Assets

Assessments and judgments are inherent in the determination of the fair value of goodwill and intangible assets. Goodwill and indefinite life intangible assets are recorded at cost and finite life intangibles are recorded at cost less accumulated amortization. Goodwill and intangible assets are tested for impairment at least annually. Assessing goodwill and intangible assets for impairment requires considerable judgment and is based in part on current expectations regarding future performance. Changes in circumstances including market conditions may materially impact the assessment of the fair value of goodwill and intangible assets.

Future Income Taxes

Future income taxes are calculated based on assumptions related to the future interpretation of tax legislation, future income tax rates, and future operating results, acquisitions and dispositions of assets and liabilities, and dividend policy. Ag Growth periodically reviews and adjusts its estimates and assumptions of income tax assets and liabilities as circumstances warrant. A significant change in any of the Company's assumptions could materially affect Ag Growth's estimate of future tax assets and liabilities.

Future Benefit of Tax-loss Carryforwards

Ag Growth should only recognize the future benefit of tax-loss carryforwards where it is more likely than not that sufficient future taxable income can be generated in order to fully utilize such losses and deductions. We are required to make significant estimates and assumptions regarding future revenues and earnings, and our ability to implement certain tax planning strategies, in order to assess the likelihood of utilizing such losses and deductions. These estimates and assumptions are subject to significant uncertainty and if changed could materially affect our assessment of the ability to fully realize the benefit of the future income tax assets. Future tax asset balances would be reduced and additional income tax expense recorded in the applicable accounting period in the event that circumstances change and we, based on revised estimates and assumptions, determined that it was no longer more likely than not that those future tax assets would be fully realized.

Ag Growth does not believe that recent economic developments significantly impact its critical accounting estimates. Accordingly, the Company does not believe that current economic conditions materially impact the valuation of its accounts receivable, inventory, intangibles, goodwill, future income taxes or tax loss carryforwards.

FINANCIAL INSTRUMENTS

Foreign exchange contracts

Risk from foreign exchange arises as a result of variations in exchange rates between the Canadian and the U.S. dollar. Ag Growth has entered into foreign exchange contracts with two Canadian chartered banks to partially hedge its foreign currency exposure on anticipated U.S. dollar sales transactions and the collection of the related accounts receivable. As at June 30, 2009, the Company had outstanding the following foreign exchange contracts:

At June 30, 2009, the fair value of the outstanding forward foreign exchange contracts was a loss of $3.9 million. Consistent with prior periods, the Company has elected to apply hedge accounting for these contracts and the unrealized loss has been recognized in other comprehensive income for the period ended June 30, 2009.

As at June 30, 2009, the Company also had outstanding a series of call and put options as follows:

At June 30, 2009, the fair value of the outstanding call and put options was a gain of $0.5 million. These call and put options are not considered to be an effective hedge for accounting purposes and the unrealized gain has been included in the Company's foreign exchange gain (loss) for the period ended June 30, 2009.

Interest rate swap transactions

Ag Growth is subject to risks associated with fluctuating interest rates on its long-term debt. To manage this risk, as at June 30, 2009, the Company had outstanding three interest rate swap transactions with a Canadian chartered bank with a total notional amount of USD $26.5 million. The swap transactions expire August 29, 2009 and result in interest charges to the Company of 3.88% plus a variable rate based on performance calculations.

At June 30, 2009, the fair value of the interest rate swap contracts was a loss of $0.1 million. Consistent with prior periods, this unrealized loss has been recognized in other comprehensive income for the period ended June 30, 2009.

OUTLOOK

Consistent with prior years, demand in the second half of the fiscal year will be influenced by crop conditions. The USDA's June 30, 2009 acreage report estimated that 2009 corn acreage in the U.S. would be the second largest in history and soybean acreage would set a new record high. Current crop conditions in most areas of the U.S. are very favourable, and according to the USDA weekly crop report dated August 3, 2009, the percentage of corn reported as "very good' or "excellent" is higher than at this time in 2008, when yields per acre were the second highest on record. These factors suggest the potential of a large harvest in the U.S. which in turn is expected to support sales of portable grain handling equipment.

Growing conditions in western Canada are mixed. Timely rains have eased drought conditions in most areas of Saskatchewan and large portions of Alberta. Moisture conditions in Manitoba are at or above normal. Plantings in most areas were later than usual and stressful growing conditions in Alberta and Saskatchewan areexpected to reduce yields in some areas. Overall, crop production in western Canada is expected to decrease somewhat from 2008 and more closely approximate historical averages. Ag Growth's sales to western Canada in the six months ended June 30, 2009 were $38.7 million (2008 - $22.1 million). Lower yields may negatively impact the sales of portable grain handling equipment in the second half, however the potential of a late harvest, the result of a late planting season, is expected to support aeration sales.

New construction and facility upgrades in the commercial grain handling sector in both North American and overseas markets will likely continue to be impacted by macro-economic factors, including access to credit. However, domestic demand for commercial equipment has been somewhat stronger than anticipated and order backlogs at Hi Roller and Union Iron are at higher levels than at this time in 2008. Demand for Twister storage products may also be negatively impacted by credit conditions in developing markets.

Gross margin percentages on portable grain handling and aeration equipment are expected to remain strong for the balance of 2009 due to the impact of price increases and moderating input costs. Gross margins on stationary grain handling equipment are expected to remain stable or slightly decrease as demand for commercial equipment returns to more historical levels. Gross margin on Twister product increased compared to 2008, however, Twister margin remains challenged by storage bin market dynamics, including a weak bin market in the U.S., and higher priced steel in its supply chain.

Ag Growth's financial results are impacted by the rate of exchange between the Canadian and U.S. dollars. A weaker Canadian dollar positively impacts sales and gross margin percentages compared to prior periods. For the three and six months ended June 30, 2009, the Canadian dollar traded at lower levels compared to the prior year and accordingly sales and gross margin percentages benefited. The Canadian dollar has strengthened recently, and accordingly the favourable impact of foreign exchange realized in the first half of 2009 may not be realized in the second half of the year. The impact of the foreign exchange rate on net earnings will be tempered in 2009, as the Company's remaining 2009 U.S. dollar exposure has been largely hedged with forward foreign exchange contracts at an average rate of $1.05, and any further strengthening in the Canadian dollar will result in an unrealized gain on the Company's U.S. dollar denominated debt, both of which will offset in part the foreign exchange impact on sales and gross margin.

Management does not currently anticipate that the current economic environment or recent developments in credit markets will have a material adverse effect on the Company. Ag Growth's portable equipment is relatively low priced and does not represent a significant investment for a farmer. In addition, the equipment is essential to continuing farming operations and must be replaced on a regular basis. Management does expect that access to credit may continue to negatively impact sales to commercial grain handling facilities and to certain international markets. Management's assessment is based on current conditions and may be subject to change if the credit environment deteriorates further.

Overall, management expects strong demand for portable grain handling and aeration equipment in the second half of 2009. Strong demand coupled with increased capacity at Westfield and sales price increases at all divisions should allow the Company to increase sales of portable grain handling and aeration equipment compared to prior years. Gross margin on these products, which account for approximately two-thirds of Ag Growth's total sales, are expected to remain strong due to the impact of sales price increases and moderating input costs. Sales of stationary grain handling equipment in the second half of 2009 are expected to decrease from the prior year, however the financial impact on the consolidated results of the Company is not expected to be significant.

BUSINESS RISK

A detailed discussion of our significant business risks is provided in the MD&A for the year ended December 31, 2008, the 2009 Annual Information Form and the Management Information Circular for the Special Meeting, all of which can be found at www.sedar.com. The following is a list of certain risk factors relating to the activities of Ag Growth and its subsidiaries and the ownership of Ag Growth common shares:

- Future dividend payments by Ag Growth and the level thereof is uncertain, as Ag Growth's dividend policy and the funds available for the payment of dividends from time to time will be dependent upon, among other things, operating cash flow generated by Ag Growth and its subsidiaries, financial requirements for Ag Growth's operations and the execution of its growth strategy, fluctuations in working capital and the timing and amount of capital expenditures, debt service requirements and other factors beyond the control of Ag Growth;

- Deteriorating economic conditions and the uncertainty of future developments in the domestic and global economies may negatively impact the demand for Ag Growth's products;

- Prices of commodities are influenced by a variety of unpredictable factors that will be beyond the control of Ag Growth;

- Ag Growth competes directly with other companies that have greater resources and access to capital;

- Ag Growth may expand its operations, depending on certain conditions, by acquiring additional businesses, products or technologies. There can be no assurance that Ag Growth will be able to identify, acquire, or profitably manage additional businesses, or successfully integrate any acquired business, products, or technologies into the business without substantial expense, delay or other operational or financial difficulty;

- Achieving the anticipated benefits of the Conversion will depend in part on Ag Growth's ability to realize the anticipated growth opportunities from reorganizing the Fund into a corporate structure;

- In the ordinary course of business, Ag Growth may be subject to audits by tax authorities. While management anticipates that Ag Growth's tax filing positions will be appropriate and supportable, it is possible that tax matters, including the calculation and determination of revenue, expenditures, deductions, credits and other tax attributes, taxable income and taxes payable, may be reviewed and challenged by the tax authorities. If such challenge were to succeed, it could have a material adverse effect on Ag Growth's tax position. Further, the interpretation of and changes in tax laws, whether by legislative or judicial action or decision, and the administrative policies and assessing practices of taxation authorities, could materially adversely affect Ag Growth's tax position;

- In the ordinary course of its business, Ag Growth may be party to various legal actions, the outcome of which cannot be predicted with certainty; and

- Ag Growth's credit facility expires August 31, 2009. There can be no guarantee that Ag Growth will be able to obtain alternate financing and no guarantee that future credit facilities will have the same terms and conditions as the existing facility.

On January 1, 2009, Ag Growth adopted the CICA Handbook Section 3064, "Goodwill and Intangible Assets", which replaced the existing "Goodwill and Intangible Assets" standard. The new standard revises the requirement for recognition, measurement, presentation and disclosure of intangible assets. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

On January 1, 2009, Ag growth adopted Emerging Issues Committee ("EIC") Abstract EIC-173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". EIC-173 provides further information on the determination of the fair value of financial assets and financial liabilities under Section 3855, "Financial Instruments - Recognition and Measurement". It states that an entity's own credit and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and liabilities, including derivative instruments. EIC-173 is applied retrospectively, without restatement of prior periods, to all financial assets and liabilities measured at fair value. The adoption of EIC-173 did not have a have a material impact on the Company's consolidated financial statements.

NEW ACCOUNTING STANDARDS

Section 1582, "Business Combinations"

In January 2009, the CICA issued the new Handbook Section 1582, "Business Combinations" effective for fiscal years beginning on or after January 1, 2011. Earlier adoption of Section 1582 is permitted. This pronouncement further aligns Canadian GAAP with U.S. GAAP and International Financial Reporting Standards ("IFRS") and changes the accounting for business combinations in a number of areas. It establishes principles and requirements governing how an acquiring company recognizes and measures in its financial statements identifiable assets acquired, liabilities assumed, any non-controlling interest in the acquiree, and goodwill acquired. The section also establishes disclosure requirements that will enable users of the acquiring company's financial statements to evaluate the nature and financial effects of its business combinations. Ag Growth is considering the impact of the adoption of this pronouncement on its consolidated financial statements in fiscal 2011 in connection with its conversion to IFRS.

In January 2009, the CICA issued the new Handbook Section 1601, "Consolidated Financial Statements", and Section 1602, "Non-Controlling Interests", effective for fiscal years beginning on or after January 1, 2011. Earlier adoption of these recommendations is permitted. These pronouncements further align Canadian GAAP with U.S. GAAP and IFRS. Sections 1601 and 1602 change the accounting and reporting of ownership interests in subsidiaries held by parties other than the parent. Non-controlling interests are to be presented in the consolidated statement of financial position within equity but separate from the parent's equity. The amount of consolidated net income attributable to the parent and to the non-controlling interest is to be clearly identified and presented on the face of the consolidated statement of income. In addition, these pronouncements establish standards for a change in a parent's ownership interest in a subsidiary and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. They also establish reporting requirements for providing sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. Ag Growth is currently considering the impact of the adoption of these pronouncements on its consolidated financial statements in fiscal 2011 in connection with its conversion to IFRS.

Conversion to International Financial Reporting Standards

In February 2008, the AcSB confirmed that IFRS will replace Canadian GAAP in 2011 for profit-oriented Canadian publicly accountable enterprises. Ag Growth will be required to report its results in accordance with IFRS starting in 2011. Under IFRS, the primary audience is capital markets and as a result there may be significantly more disclosure required, particularly for quarterly reporting. Further, while IFRS uses a conceptual framework similar to Canadian GAAP, there may be significant differences in accounting policy that must be addressed.

The Company formally commenced an IFRS conversion project in the third quarter of 2008 and engaged the services of an external advisor with IFRS expertise to work with management. Regular reporting is provided to Ag Growth's senior management and to the Audit Committee of the Board of Directors. An assessment was initiated to examine the extent of the impact that the conversion may have on financial reporting, business processes, internal controls and information systems. The Company's plan is aimed in particular at identifying the differences between IFRS and the Company's current accounting policies, as well as assessing the impact of various accounting alternatives offered pursuant to IFRS. Ag Growth's assessment of key areas including Income Taxes, Foreign Exchange, and Property Plant and Equipment continued in the second quarter of 2009. The Company will continue to evaluate these and other key areas in the coming quarters. The financial impact of the transition to IFRS cannot be reasonably estimated at this time, however, there will likely be changes in accounting policies and these may materially impact the Company's financial statements.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including Ag Growth's Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure.

Management of Ag Growth is responsible for designing internal controls over financial reporting for the Company as defined under National Instrument 52-109 issued by the Canadian Securities Administrators. Management has designed such internal controls over financial reporting, or caused them to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with GAAP.

There have been no changes in Ag Growth's internal controls over financial reporting that occurred in the three month period ended June 30, 2009, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

NON-GAAP MEASURES

References to "EBITDA" are to earnings before interest, income taxes, depreciation amortization and Conversion costs. References to "Adjusted EBITDA" are to EBITDA before the gain (loss) on foreign exchange. Management believes that, in addition to net income or loss, EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the Company's performance. EBITDA and Adjusted EBITDA are not financial measures recognized by GAAP and do not have a standardized meanings prescribed by GAAP. Management cautions investors that EBITDA and Adjusted EBITDA should not replace net income or loss as indicators of performance, or cash flows from operating, investing, and financing activities as a measure of the Company's liquidity and cash flows. Ag Growth's method of calculating EBITDA and Adjusted EBITDA may differ from the methods used by other issuers.

References to "gross margin" are to sales less cost of goods sold. Management believes that, in addition to net income or loss, gross margin provides a useful supplemental measure in evaluating Ag Growth's performance. Gross margin is not a financial measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Management cautions investors that gross margin should not replace net income or loss as an indicator of performance, or cash flows from operating, investing, and financing activities as a measure of the Company's liquidity and cash flows. Ag Growth's method of calculating gross margin may differ from the methods used by other issuers.

References to "funds from operations" are to cash flow from operating activities, before the net change in non-cash working capital balances related to operations, less capital expenditures. Management believes that, in addition to cash provided by (used in) operating activities, funds from operations provide a useful supplemental measure in evaluating its performance. Funds from operations is not a financial measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. The method of calculating funds from operations may differ from similar computations as reported by similar entities. Management cautions investors that funds from operations should not replace net income or loss as an indicator of performance, or cash flows from operating, investing, and financing activities as a measure of the Company's liquidity and cash flows.

References to "payout ratio" are to dividends declared as a percentage of funds from operations. Payout ratio is not a financial measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. The method of calculating the Company's payout ratio may differ from similar computations as reported by similar entities and, accordingly, may not be comparable to the payout ratio as reported by such entities.

ADDITIONAL INFORMATION

Additional information relating to Ag Growth and the Fund, including the Fund's most recent Annual Information Form, is available on SEDAR (www.sedar.com).

Net decrease in cash and cash equivalents during the period - - (4,391) (20,411)Cash and cash equivalents, beginning of period - - 4,391 20,411 --------------------------------------------------Cash and cash equivalents, end of period - - - - -------------------------------------------------- --------------------------------------------------

Ag Growth International Inc. ("Ag Growth" or the "Company") acquired all of the trust units of its predecessor, Ag Growth Income Fund (the "Fund") in exchange for common shares of Ag Growth pursuant to an arrangement completed pursuant to Section 192 of the Canada Business Corporations Act effective June 3, 2009 (the "Conversion") (note 2). Ag Growth conducts business in the grain handling, storage and conditioning market.

Included in these unaudited interim consolidated financial statements are the accounts of Ag Growth and its predecessor, the Fund, (collectively hereinafter referred to as "Ag Growth" or the "Company") and all of its subsidiary limited partnerships and incorporated companies.

2. CORPORATE CONVERSION

The Conversion was completed pursuant to a Plan of Arrangement with, among others, Ag Growth (then known as Benachee Resources Inc. ("Benachee")) (note 6). As a result of the Conversion, holders of Fund trust units and Class B exchangeable units of a subsidiary of the Fund received one common share of Benachee in exchange for every unit held on the effective date of the Conversion, and Benachee changed its name to Ag Growth International Inc.

The Conversion was accounted for as a continuity of interests of the Fund since there was no change of control and since Ag Growth continues to operate the business of the Fund. These unaudited interim consolidated financial statements reflect Ag Growth as a corporation on and subsequent to June 3, 2009 and as Ag Growth Income Fund prior thereto. All references to "common shares" refer collectively to Ag Growth's common shares on and subsequent to June 3, 2009 and to Fund units prior to the Conversion. All references to "dividends" refer to dividends paid or payable to holders of Ag Growth common shares on and subsequent to June 3, 2009 and to distributions paid or payable to Fund unitholders prior to the Conversion. All references to "shareholders" refer collectively to holders of Ag Growth's common shares on and subsequent to June 3, 2009 and to Fund unitholders prior to the Conversion. References to the "Share Award Incentive Plan" should be read as references to the "Unit Award Incentive Plan" for all periods prior to the Conversion.

3. BASIS OF PRESENTATION

The unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). They have been prepared using the same accounting policies and methods of application as disclosed in Ag Growth's audited consolidated financial statements for the year ended December 31, 2008, except as described in note 4.

These unaudited interim consolidated financial statements do not include all of the information and notes to the financial statements required by Canadian GAAP for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and notes included in Ag Growth's annual report for the year ended December 31, 2008.

Accounting measurements at interim dates inherently involve a greater reliance on estimates than at year end. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature to present fairly the consolidated financial position of the Company as at June 30, 2009.

4. CHANGES IN ACCOUNTING POLICIES AND PRACTICES

On January 1, 2009, Ag Growth adopted the following Canadian Institute of Chartered Accountants ("CICA") Handbook Sections:

Section 3064, "Goodwill and Intangible Assets"

On January 1, 2009, Ag Growth adopted the CICA Handbook Section 3064, "Goodwill and Intangible Assets", which replaced the existing "Goodwill and Intangible Assets" standard. The new standard revises the requirement for recognition, measurement, presentation and disclosure of intangible assets. The adoption of this standard did not have a material impact on Ag Growth's unaudited interim consolidated financial statements.

EIC-173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities"

On January 1, 2009, Ag Growth adopted Emerging Issues Committee ("EIC") Abstract 173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". EIC-173 provides further information on the determination of the fair value of financial assets and financial liabilities under CICA Handbook Section 3855, "Financial Instruments - Recognition and Measurement". It states that an entity's own credit and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and liabilities, including derivative instruments. EIC-173 is applied retrospectively, without restatement of prior periods, to all financial assets and liabilities measured at fair value. The adoption of EIC-173 did not have a material impact on Ag Growth's unaudited interim consolidated financial statements.

5. RECENT ACCOUNTING PRONOUNCEMENTS

In January 2009, the CICA issued the new Handbook Section 1582, "Business Combinations" effective for fiscal years beginning on or after January 1, 2011. Earlier adoption of Section 1582 is permitted. This pronouncement further aligns Canadian GAAP with U.S. GAAP and International Financial Reporting Standards ("IFRS") and changes the accounting for business combinations in a number of areas. It establishes principles and requirements governing how an acquiring company recognizes and measures in its financial statements identifiable assets acquired, liabilities assumed, any non-controlling interest in the acquiree, and goodwill acquired. The section also establishes disclosure requirements that will enable users of the acquiring company's financial statements to evaluate the nature and financial effects of its business combinations. Ag Growth is considering the impact of the adoption of this pronouncement on its consolidated financial statements in fiscal 2011 in connection with its conversion to IFRS.

In January 2009, the CICA issued the new Handbook Section 1601, "Consolidated Financial Statements", and Section 1602, "Non-Controlling Interests", effective for fiscal years beginning on or after January 1, 2011. Earlier adoption of these recommendations is permitted. These pronouncements further align Canadian GAAP with U.S. GAAP and IFRS. Sections 1601 and 1602 change the accounting and reporting of ownership interests in subsidiaries held by parties other than the parent. Non-controlling interests are to be presented in the consolidated balance sheet within equity but separate from the parent's equity. The amount of consolidated net income attributable to the parent and to the non-controlling interest is to be clearly identified and presented on the face of the consolidated statement of earnings and deficit. In addition, these pronouncements establish standards for a change in a parent's ownership interest in a subsidiary and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. They also establish reporting requirements for providing sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. Ag Growth is currently considering the impact of the adoption of these pronouncements on its consolidated financial statements in fiscal 2011 in connection with its conversion to IFRS.

In February 2008, the AcSB confirmed that IFRS will replace Canadian GAAP in 2011 for profit-oriented Canadian publicly accountable enterprises. Ag Growth will be required to report its results in accordance with IFRS starting in 2011. Ag Growth formally commenced an IFRS conversion project in the third quarter of 2008 and has engaged the services of an external advisor with IFRS expertise to work with management. Ag Growth will continue to invest in training and resources to ensure a timely and effective conversion. Regular reporting is provided to Ag Growth's senior management and to the Audit Committee of the Board of Directors. To date, an initial diagnostic assessment has been completed and an IFRS conversion plan has been developed. A diagnostic assessment has been initiated to examine the extent of the impact that the conversion may have on financial reporting, business processes, internal controls and information systems. Ag Growth's current plan is aimed in particular at identifying the differences between IFRS and Ag Growth's current accounting policies, as well as assessing the impact of various accounting alternatives offered pursuant to IFRS. In addition, a high level assessment of Ag Growth's information technology systems and tax processes will be conducted, and is underway. The financial impact of the transition to IFRS cannot be reasonably estimated at this time, however, there will likely be changes in accounting policies and these may materially impact Ag Growth's unaudited interim consolidated financial statements.

6. PLAN OF ARRANGEMENT

The Conversion was completed effective June 3, 2009 pursuant to a Plan of Arrangement with, among others, Benachee. As a result of the Plan of Arrangement, holders of Fund trust units and Class B exchangeable units of the Fund received one common share of Benachee in exchange for every unit held on the effective date of the Conversion, and Benachee changed its name to Ag Growth International Inc. Pursuant to the Plan of Arrangement, consideration in the form of $5.0 million cash, 182,588 common shares at an estimated fair value of $24.65 per share, being the volume weighted trading price of the Fund's units on the two days before and the two days after April 19, 2009, the date the Fund's trustees approved and announced the terms of the transaction, and par value $4.0 million of redeemable preferred shares, convertible into 140,452 common shares, was issued to the parent corporation of Benachee, a participant in the Plan of Arrangement. Prior to June 3, 2009, Benachee transferred substantially all of its assets and all of its liabilities to a related company and as a result Ag Growth did not acquire the business operations of Benachee.

The Conversion was accounted for as a continuity of interests of the Fund since there was no change of control and since Ag Growth continues to operate the business of the Fund. Transaction costs related to the Conversion of $1.7 million have been expensed in the three- and six-month periods ended June 30, 2009.

On June 3, 2009, the effective date of the Plan of Arrangement, thefollowing assets and liabilities have been recorded in the consolidatedfinancial statements:

Prior to the Conversion, there were 136,085 Class B Exchangeable units outstanding in a subsidiary of the Fund that were exchangeable for Fund Trust units at the option of the holder on a one-for-one basis at any time. In conjunction with the Conversion, these Class B units were exchanged for common shares of Ag Growth.

Issuance of common shares

In conjunction with the Conversion, Ag Growth issued 182,588 common shares from treasury to the sole shareholder of Benachee. The fair value of the common shares of $24.65 per common share was based on the average trading price of the Fund's units on the two days before and the two days after April 19, 2009, the date the Fund's Trustees approved and announced the terms of the transaction.

Normal course issuer bid

On October 22, 2008, Ag Growth commenced a normal course issuer bid for up to 1,262,090 common shares, representing 10% of the Company's public float at that time. The normal course issuer bid will terminate on October 21, 2009 unless terminated earlier by Ag Growth. Ag Growth did not purchase any common shares under the normal course issuer bid in the six-month period ended June 30, 2009.

Balance, December 31, 2007 539Other comprehensive income (loss) in period (11,099) --------Balance, December 31, 2008 (10,560)Other comprehensive income in period 7,933 --------Balance, June 30, 2009 (2,627) -------- --------

8. REDEEMABLE PREFERRED SHARES

Pursuant to the Plan of Arrangement completed on June 3, 2009, Ag Growth issued 4,000,000 redeemable preferred shares with a stated value of $1.00 per share. The preferred shares are entitled to receive fixed cumulative preferential cash dividends, as and when declared by the Board of Directors, out of monies properly applicable to the payment of dividends at a rate $0.05 per share per annum. Each redeemable preferred share is also convertible at the holder's option into 0.035113 of a common share, for a total of 140,452 common shares, at any time up to three years from the date of issuance. Each redeemable preferred share is redeemable at any time from the date of issuance until June 30, 2010 at the option of Ag Growth and retractable, at the holder's option, at any time on or after June 30, 2010 in each case for $1.00 cash per redeemable preferred share plus accrued and unpaid cumulative dividends thereon.

The Company presents and discloses its financial instruments in accordance with the substance of its contractual arrangement. Accordingly, $3.6 million of the Company's redeemable preferred shares have been classified as a liability since the Company is obligated to pay cash to redeem these preferred shares. Dividends related to the liability will be classified as an expense on the statement of earnings and deficit. The estimated fair value of the holder's option to convert the Class A preferred shares to common shares in the amount of $0.4 million has been separated from the fair value of the liability and has been included in shareholders' equity.

9. CAPITAL STRUCTURE

Ag Growth's capital structure is comprised of shareholders' equity and long-term debt. Ag Growth's objectives when managing its capital structure are to maintain and preserve its access to capital markets, continue its ability to meet its financial obligations, including the payment of dividends, and finance organic growth and acquisitions.

Ag Growth monitors its capital structure using non-GAAP financial metrics including long-term debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") for the immediately preceding 12-month period and long-term debt to shareholders' equity.

Ag Growth's optimal capital structure targets to maintain its long-term debt to EBITDA ratio at levels below 2.5, after taking into consideration the impacts of industry cyclicality and acquisitions. The table below calculates the ratio based on EBITDA achieved in the previous 12 months:

As at As at June 30, 2009 December 31, 2008 ----------------------------------Long-term debt $55.6 million $52.8 millionEBITDA $47.1 million $34.6 millionRatio 1.18 times 1.53 times

Ag Growth's optimal capital structure targets to maintain its long-term debt to shareholders' equity ratio at levels below 1.0, after taking into consideration the impacts of industry cyclicality and acquisitions:

As at As at June 30, 2009 December 31, 2008 ----------------------------------Long-term debt $55.6 million $52.8 millionShareholders' equity $151.9 million $125.5 millionRatio 0.37 times 0.42 times

Ag Growth's capital management objectives, evaluation measures, definitions and targets have remained unchanged over the periods presented. Ag Growth is subject to certain financial covenants in its credit facility agreement which must be maintained to avoid acceleration of the termination of the agreement. Ag Growth is in compliance with all financial covenants.

10. SEASONALITY OF BUSINESS

Interim period sales and earnings historically reflect some seasonality. The third quarter is typically the strongest primarily due to high in-season demand at the farm level. Ag Growth's collections of accounts receivable are weighted towards the third and fourth quarters. This collection pattern, combined with seasonally high sales in the third quarter, result in accounts receivable levels increasing throughout the year and normally peaking in the third quarter. As a result of these working capital movements, Ag Growth's use of its bank revolver is typically highest in the first and second quarters. Historically, the revolver balance begins to decline in the third quarter as collections of accounts receivable increase. Ag Growth would expect to repay its revolver in the third or fourth quarter of each year.

11. BANK INDEBTEDNESS

Ag Growth's credit facility includes Cdn. $25 million and U.S. $2.0 million available for working capital and general corporate purposes. The facilities bear interest at a rate of prime plus 1.75% to prime plus 2.0% per annum based on performance calculations. The effective interest rate during the three-month and six-month periods ended June 30, 2009 on Ag Growth's Canadian dollar term debt was 3.3% and 3.2%, respectively (2008 - 4.6% and 5.0%), and on its U.S. dollar term debt was 4.3% and 3.8%, respectively (2008 - 6.6% and 7.1%). At June 30, 2009, there was $7.3 million outstanding under these facilities (December 31, 2008 - nil). Collateral for the operating facilities includes a general security agreement over all assets, first position collateral mortgages on land and buildings and assignments of rents and leases and security agreements for patents and trademarks.

12. INCOME TAXES

Ag Growth converted from a publicly traded income trust to a publicly traded corporation on June 3, 2009 (notes 2 and 6). Accordingly, Ag Growth's calculation of current and future income taxes for the periods ended June 30, 2009 is based on the conversion to a corporate structure, whereas the calculation of current and future income taxes for the periods ended June 30, 2008 is based on Ag Growth being a publicly traded income trust.

In June 2007, the Government of Canada enacted legislation to impose additional taxes on income trusts, including the Fund, effective January 1, 2011. Under this legislation, and updated legislation enacted in 2008, the Fund estimated its future income taxes on the reversal of certain temporary differences between amounts recorded for book and income tax purposes based on effective tax rates of between 28.0% and 29.5%, applied only to reversals subsequent to January 1, 2011. Due to its status as an income trust, temporary differences reversing before 2011 still gave rise to future income taxes of nil. Subsequent to the Conversion, Ag Growth is no longer an income trust and, accordingly, is required to estimate its future income taxes on the reversals of all temporary differences, including those reversing before 2011. As a result, an additional future income tax recovery of $1,598 was recorded as of the effective date of the conversion.

For the three- and six-month periods ended June 30, 2009, Ag Growth has recorded a current income tax expense of $931 and $164, respectively (2008 - $1,277 and $1,805), primarily related to income of its U.S. corporation subsidiaries.

Ag Growth's future income tax asset and liability are comprised of thefollowing components:

The Company recorded a deferred credit relating to the difference between the future income tax asset and the amount of the consideration paid pursuant to the Plan of Arrangement (note 6). The credit is being amortized to income in proportion to reversal of the future tax asset.

Income tax provisions, including current and future income tax assets and liabilities, require estimates and interpretations of federal and provincial income tax rules and regulations, and judgments as to their interpretation and application to Ag Growth's specific situation. The amount and timing of reversals of temporary differences will also depend on Ag Growth's future operating results, acquisitions and dispositions of assets and liabilities. Therefore, it is possible that the ultimate value of Ag Growth's income tax assets and liabilities could change in the future and that change to these amounts could have a material effect on these consolidated financial statements.

13. ACQUISITIONS

Prior year acquisitions

As described in the December 31, 2008 audited consolidated financial statements, Ag Growth acquired substantially all of the operating assets of Applegate Steel Inc. effective January 15, 2008, the operating assets of Twister Pipe Ltd. effective May 31, 2007 and the outstanding shares of Union Iron Inc. effective November 19, 2007. Subsequent to December 31, 2007, transaction costs were paid from cash and cash held in trust. Cash held in trust relating to these acquisitions was released in 2008.

Ag Growth is exposed to financial risks arising from financial assets and liabilities. The Company's objectives in managing these risks are to protect from volatility in net earnings and to minimize exposure from fluctuations in market rates. The financial risks include foreign exchange risk, interest rate risk, credit risk and liquidity risk as follows:

(a) Foreign exchange risk

Ag Growth operates primarily in North America and as a result fluctuations in the rate of exchange between the U.S. and Canadian dollar can have a significant effect on its cash flows and reported results. To mitigate exposure to the fluctuating rate of exchange, Ag Growth enters into foreign exchange contracts and denominates a portion of its debt in U.S. dollars. At June 30, 2009, Ag Growth's U.S. dollar denominated debt totalled U.S. $37.6 million and the Company had entered into the following foreign exchange contracts to sell U.S. dollars in order to hedge their foreign exchange risk:

Ag Growth's sales denominated in U.S. dollars for the six-month period ended June 30, 2009 were U.S. $68.5 million, and the total of its cost of goods sold and its selling, general and administrative expenses denominated in that currency were U.S. $32.1 million. Accordingly, a 10% increase or decrease in the value of the U.S. dollar relative to its Canadian counterpart would result in a $6.9 million increase or decrease in sales and a total increase or decrease of $3.2 million in its cost of goods sold and its selling, general and administrative expenses. In relation to the Ag Growth's foreign exchange hedging contracts, a 10% increase or decrease in the value of the U.S. dollar relative to its Canadian counterpart would result in an increase or decrease in the foreign exchange loss of $1.8 million and an increase or decrease to other comprehensive income of $11.4 million.

(b) Interest rate risk

Ag Growth is subject to risks associated with fluctuating interest rates on its long-term debt. To manage this risk, the Company has entered into a number of interest rate swap transactions with a Canadian chartered bank and has limited its exposure to changes in interest rates on its variable rate debt as follows:

Notional amounts of U.S. $17.5 million, U.S. $6.5 million and U.S. $2.5 million expire August 29, 2009, effective interest rate of 2.88%, resulting in interest charges to the Fund of 3.88% plus a variable rate based on performance calculations.

At June 30, 2009, if interest rates on debt were to fluctuate by 1%, and all other variables were held constant, the impact on Ag Growth's earnings before income taxes would be $0.1 million.

(c) Credit risk

Credit risk is the risk that a customer will fail to perform an obligation or fail to pay amounts due causing a financial loss A substantial portion of Ag Growth's accounts receivable are with customers in the agriculture industry and are subject to normal industry credit risks. This credit exposure is mitigated through the use of credit practices that limit transactions according to the customer's credit quality, through the use of insurance on certain international accounts receivable, and due to the accounts receivable being spread over a large number of customers. Ag Growth establishes a reasonable allowance for non-collectible amounts with this allowance netted against the accounts receivable on the consolidated balance sheets. Ag Growth does not hold collateral as security of these balances.

Ag Growth does not believe it has significant concentration risk. The maximum credit risk exposure associated with accounts receivable is the total carrying value.

As is typical in the agriculture sector, Ag Growth may offer extended terms on its accounts receivable to match the cash flow cycle of its customer. The table below sets out the details of the accounts receivable balances outstanding as at June 30, 2009, based on the status of the receivable in relation to when the receivable was due and payable:

$ -------- (000's)

Neither impaired nor past due 29,822Not impaired and past the due date as follows Within 30 days 6,917 31 to 60 days 2,476 61 to 90 days 1,388 Over 90 days 3,992Allowance for doubtful accounts (463) --------Balance, June 30, 2009 44,132 -------- --------

The following table represents a summary of the movement of the allowancefor doubtful accounts:

Liquidity risk is the risk that Ag Growth will encounter difficulties in meeting its financial liability obligations. Ag Growth manages its liquidity risk through cash and debt management. In managing liquidity risk, the Company has access to committed short and long-term debt facilities as well as to equity markets, the availability of which is dependent on market conditions. Ag Growth believes it has sufficient funding through the use of these facilities to meet foreseeable borrowing requirements. Trade payables are due within one year and long-term debt is due August 31, 2009 and is extendible annually for an additional one-year term at the lender's option. Under the terms of the Company's credit facility arrangement, if the bank elects not to extend the credit facilities beyond the current August 31, 2009 maturity date, all amounts outstanding under the facilities become repayable in four equal quarterly instalments of principal, commencing on November 30, 2010.

Fair value

As disclosed in the December 31, 2008 annual audited consolidated financial statements, Ag Growth has made the following classifications of its financial instruments:

- Cash and cash equivalents are classified as "assets held for trading" and are measured at fair value. Gains and losses resulting from the periodic revaluation are recorded in net earnings.

- Accounts receivable are classified as "loans and receivables" and are recorded at fair value upon initial measurement. Subsequent measurements are recorded at amortized cost using the effective interest rate method.

- Accounts payable and accrued liabilities are classified as "other financial liabilities" and are measured at their fair value upon initial measurement. Subsequent measurements are recorded at amortized cost using the effective interest rate method.

- Long-term debt is classified as an "other financial liability" and is initially measured at fair value. Subsequent measurements are recorded at amortized cost using the effective interest rate method. The deferred financing costs, are netted against the carrying value of the related debt and amortized into interest expense using the effective interest rate method.

- Derivative financial instruments are measured at fair value, even when they are part of a hedging relationship. All changes in fair value are recorded in earnings unless cash flow hedge accounting is used, in which case the effective portion of the changes in fair value is recorded in other comprehensive income.

- Preferred shares are classified as an "other financial liability" and are initially measured at fair value. Subsequent measurements are recorded at amortized cost using the effective interest rate method.

At June 30, 2009, the carrying value of cash and cash equivalents, accounts receivable, bank indebtedness, accounts payable and accrued liabilities and preferred shares approximates their fair value due to the relatively short period to maturity. Long-term debt with a variable interest rate is carried at amortized cost, which approximates fair value. Derivatives are valued based on market quotations. However, when financial instruments lack an available trading market, fair value is determined using management's estimates and is calculated using market factors with similar characteristics and risk profiles. At June 30, 2009, the fair value and carrying value of the foreign exchange contracts was an unrealized loss of $3,392 (December 31, 2008 - $10,101) and the fair value and carrying value of the interest rate swaps that are part of an effective hedging relationship was an unrealized loss of $129 (December 31, 2008 - $459). The fair value of the liability component of the preferred shares was estimated by discounting the future payments of interest and principal and will be accreted to their face value over the earlier of the redemption or retraction date or June 30, 2010.

Over the next 12 months, Ag Growth expects to realize an estimated $3.5 million in net losses reported in accumulated other comprehensive income as unrealized losses as at June 30, 2009.

15. SEGMENTED DISCLOSURE

Ag Growth operates in one business segment related to the manufacturing and distributing of portable and stationary grain handling, storage and conditioning equipment. Geographic information about the Company's sales is based on the product shipment destination. Assets are based on their physical location as at the period end:

Effective January 1, 2007, Ag Growth adopted an amended LTIP. Pursuant to the LTIP, the Company establishes the amount to be allocated to eligible participants based upon the amount by which distributable cash, as defined in the LTIP, exceeds a predetermined threshold. The amount owing to participants is recorded as a long-term incentive plan liability with the offset recorded to net earnings. At such time that the common shares are purchased the liability is reclassified to contributed surplus under shareholders' equity. In April 2009, the administrator purchased 11,008 common shares in the market for $286 to satisfy its obligation related to fiscal 2008. During the six months ended June 30, 2009, $365 was reclassified from the long-term incentive plan liability to contributed surplus.

The common shares awarded vest over a three-year period commencing one year after the fiscal year of the award. As at June 30, 2009, 23,467 LTIP common shares have vested to the participants. Cash dividends paid on common shares held by the administrator are retained and are payable to participants in the plan on the vesting date. The expense related to the LTIP is recorded in relation to the vesting period and accordingly the total award will be expensed as to 36% in the initial fiscal year and 36%, 20% and 8% in the next three fiscal years, respectively, subsequent to the current year. For the three- and six-month periods ended June 30, 2009, Ag Growth has recorded an expense with respect to the LTIP of $700 and $1,150, respectively (2008 - $200 and $550). The amount to be expensed in future periods with respect to the LTIP for fiscal 2007 and 2008 is $392 and $131, respectively.

17. SHARE AWARD INCENTIVE PLAN

The Company has a share award incentive plan which authorizes the Directors to grant awards ("Share Awards") to employees or officers of Ag Growth or any affiliates of the Company or who are consultants or other service providers to the Company and its affiliates ("Service Providers"). Share Awards may not be granted to non-management Directors.

Under the terms of the Share Award Incentive Plan (the "Share Award Plan"), any Service Provider may be granted Share Awards. Each Share Award will entitle the holder to be issued the number of common shares designated in the Share Award, upon payment of an exercise price of $0.10 per common share and the common shares will vest and may be issued as to one third on each of January 1, 2010, January 1, 2011 and January 1, 2012 or such earlier or later dates as may be determined by the Directors. In lieu of receiving common shares, the holder, with the consent of Ag Growth, may elect to be paid cash for market value of the common shares in excess of exercise price of the common shares. The Share Award Plan provides for immediate vesting of the Share Awards in the event of retirement, death, termination without cause or in the event the Service Provider becomes disabled.

The shareholders reserved for issuance 220,000 common shares, subject to adjustment in lieu of dividends, if applicable. The aggregate number of Share Awards granted to any single Service Provider shall not exceed 5% of the issued and outstanding common shares of Ag Growth. In addition:

(a) The number of common shares issuable to insiders at any time, under all security based compensation arrangements of the Company, shall not exceed 10% of the issued and common shares of Ag Growth; and

(b) The number of common shares issued to insiders, within any one-year period, under all security based compensation arrangements of the Company, shall not exceed 10% of the issued and outstanding common shares of Ag Growth.

220,000 Share Awards have been granted and remain outstanding as at June 30, 2009. For the three- and six-month periods ended June 30, 2009, Ag Growth recorded an expense of $826 and $1,694, respectively, for the Share Awards (2008 - $686 and 857).

18. DIRECTORS' DEFERRED COMPENSATION PLAN

On May 8, 2008, the shareholders of Ag Growth approved the adoption by the Company of the Directors' Deferred Compensation Plan (the "Plan"), which provides that a minimum of 20% of the remuneration of non-management Directors be payable in common shares of the Company. The principal purpose of the Plan is to encourage non-management Director ownership of common shares. A Director will not be entitled to receive the common shares granted for three years from the date of grant or until the Director ceases to be a Director, whichever is earlier. Director remuneration under the Plan will be expensed over the three-year vesting period of the share grants. For the three- and six-month periods ended June 30, 2009, Ag Growth recorded an expense of $15 for the share grants, and a corresponding amount has been recorded to contributed surplus.

The price to be used for determining the number of common shares to be granted will be the weighted average trading price of common shares for the ten trading days preceding the Company's financial quarter. The total number of common shares issuable pursuant to the Plan shall not exceed 35,000, subject to adjustment in lieu of dividends, if applicable. Mandatory participation in the Plan commenced January 1, 2009. As at June 30, 2009, a total of 5,532 common shares had been granted under the Plan and no common shares had been issued.

19. LONG-TERM DEBT

June 30, December 31, 2009 2008 $ $ (000's) (000's) ------------------------Term loans of U.S. $37,630 (2008 - U.S. $37,630) and $11,920 (2008 - $6,920), interest payable monthly at prime plus 1.75% to prime plus 2.0% per annum based on performance calculations. The Company entered into interest rate swap contracts to fix its interest rate at 2.88% on U.S. $26,500 plus 2.75% to 3.0% per annum based on performance calculations. The effective interest rate on the U.S. term loan during the six-month period ended June 30, 2009 after consideration of the effect of the interest rate swap was 4.1%. The effective interest rate on the Canadian dollar term loan for the period ended June 30, 2009 was 3.2% 55,665 53,002GMAC loans, 0% maturing in 2011 and 2014. Vehicles financed are pledged as collateral 53 61 ------------------------ 55,718 53,063Less current portion 17 18Less deferred financing costs 77 254 ------------------------ 55,624 52,791 ------------------------ ------------------------

Ag Growth's credit facility provides for long-term debt of up to U.S. $54,500.

Collateral for the operating facility and term loans (note 11) includes a general security agreement over all assets, first position collateral mortgages on land and buildings, assignments of rents and leases and security agreements for patents and trademarks.

The term loans mature August 31, 2009 and are extendible annually for an additional one-year term at the lender's option. Under the terms of the credit facility agreement, if the bank elects not to extend the operating loan and term loan facilities beyond the current August 31, 2009 maturity date, all amounts outstanding under the facilities become repayable in four equal quarterly installments of principal, commencing on November 30, 2010.

Principal repayments due within the next three fiscal years, if the termloans are not renewed and are repayable commencing November 30, 2010, areas follows:

$ -------- (000's)

2009 82010 13,9332011 41,777 -------- 55,718 -------- --------

20. RELATED PARTY TRANSACTION

Burnet, Duckworth and Palmer LLP provides legal services to the Company and a Director of Ag Growth is counsel to Burnet, Duckworth and Palmer LLP. The total cost of these legal services related to the Conversion during the six-month period ended June 30, 2009 was $0.7 million which has been included in accrued transaction costs. These transactions are measured at the exchange amount and were incurred during the normal course of business on similar terms and conditions to those entered into with unrelated parties.

21. STOCK OPTION PLAN

On June 3, 2009, the shareholders of Ag Growth approved a stock option plan (the "Option Plan") under which options may be granted to officers, employees and other eligible service providers in order to provide an opportunity for these individuals to increase their proprietary interest in Ag Growth's long-term success.

The Company's Board of Directors or a Committee thereof shall administer the Option Plan and designate the individuals to whom options may be granted and the number of common shares to be optioned to each. The maximum number of common shares issuable on exercise of outstanding options at any time may not exceed 7.5% of the aggregate number of issued and outstanding common shares, less the number of common shares issuable pursuant to all other security based compensation agreements. The number of common shares reserved for issuance to any one individual may not exceed 5% of issued and outstanding common shares.

Options will vest and be exercisable as to one-third of the total number of common shares subject to the options on each of the first, second and third anniversaries of the date of the grant. The exercise price of the options shall be fixed by the Board of Directors or a Committee thereof on the date of the grant and may not be less than the market price of the common shares on the date of the grant. The options must exercised within five years of the date of the grant.

As at June 30, 2009, a total of 970,319 options are available for grant. No options have been granted as at June 30, 2009.